IVA and monthly payments

WishIwasacat

I am a newly registered member although I have been looking at this website alot recently. I wondered if you could help me?

This is a situation where husband and wife are into the 2nd year of a 5 year IVA. The monthly figures were calculated at the beginning of the term as usual.

In the last few months, both the husband and wife have been promoted in their respective jobs; therefore increasing the household income. However, IP has not been informed of the increase and the monthly repayments have not been amended to take this into account.

My questions are:

1. How much of an increase would justify having to tell the IP?

2. If they say they are entitled to all of it, (the total extra income for 5 months equates to approximately £4,000.00) can they demand it immediately or could it be added to the end of the term somehow?

3. If it cannot be paid back immediately, can the couple be made bankrupt?

4. Has anything illegal been done by the couple?

I would be really pleased if someone could help me with these queries so that I can help put someone's mind at rest.

Thank you in anticipation

Charco_2

Check your terms and conditions but...

1. How much of an increase would justify having to tell the IP?
You SHOULD in form your IP of ANY changes to your circumstances - bear in mind, they are simply the referees, the creditors are the judges and it's just up to you to negotiate a good middle ground (the IP will point you towards the middle ground but the IVA is YOURS so it's really up to you!) If your income had fallen somehow, you would want to tell your IP to try to decrease your payments.

2. If they say they are entitled to all of it, (the total extra income for 5 months equates to approximately £4,000.00) can they demand it immediately or could it be added to the end of the term somehow?
It depends on the terms and conditions in your IVA but the general rule tends to be that you must contribute HALF of any increase in income (either through promotion or bonuses or overtime etc) - that way, there is at least some motivation for you do overtime or earn extra commission or work for that promotion. (in the highly unlikely event that they'll demand it all then yes you would be able take your time to make up the backlog)

3. If it cannot be paid back immediately, can the couple be made bankrupt?
It is so unlikely it would come to this - even if they decided to fail your IVA, there is more chance of you winning the lottery than there is of them making you bankupt!

4. Has anything illegal been done by the couple?
No. If you actually tried to hide this then at some stage it might become fraud but at the minute it's nothing - but do inform your IP soon!


Congratulations to both of you

WishIwasacat

Thank you, this has been very helpful - I will let you know how the situation is resolved

WishIwasacat

Chrarco, just one other thing - can you be made bankrupt if you are in negative equity?

Charco_2

No. If there is no equity in your home then you have no equity to release.

Bear in mind also that the amount of REALISABLE equity is not the same as the amount of equity!

If you have a house worth £100,000 and a mortgage of £85,000 then, in all likeliness, no other mortgage company is going to release any equity for you... the best loan-to-value ratio (LTV) you are likely to find is 85% (or maybe 90%).

So although you might have £15,000 of equity in your home, your IP and your creditors know that you will not be able get your hands on it so effectively you may as well have no equity! You're almost never required to sell - you might be asked to make some extra payments to your IVA for a year.

IF your house is worth £250,000 and you have a mortgage of £200,000 then you might think you'd have to release £50k to your creditors but realistically a lender is only going to want to give you a mortgage for £212,000 - so really you'd only have to bring £12,000 into your IVA (and maybe some token payments in consideration of the rest!)

***Sorry, i went off on a ramble there. The answer is no, if you've negative equity then you'll just not be expected to release anything from your home!***

davidgmmafan

My understanding is that you are supposed, indeed obliged, to inform them of this change. However posts on here sugest that they would not take more than 50% of the increased income since otherwise there would be no real incentive to increase your income. So both you and the creditors are a little better off.

To no 4 I'd say its a lot like saying you are single when you aren't and as far as I know there's a law which says you have to tell the truth in an IVA.